Secretary-General

Towards a green economy: How Spain's energy sector can help combat climate change

Comments by Ángel Gurría, OECD Secretary-General, delivered at a seminar organised for the 25th Anniversary of the Spanish Energy Club

4 May 2011
Madrid, Spain
(Translation of text as presented)

Your Royal Highness, Mr. Galán, Ladies and Gentlemen:

Thank you for inviting me to join with you in celebrating the 25th anniversary of the Spanish Energy Club. The Energy Club and the OECD share the key goal of promoting knowledge and public debate to move towards a new growth model that respects the environment.

This is a fundamental objective in a period of economic restructuring, at this time of change and opportunity. I would like to share some thoughts with you on the importance of this process of change and the role that Spain can play in it.

Energy uncertainty: the transition to the era of renewable energy sources

We are living in fascinating but uncertain times for energy markets. The last two decades have seen the emergence of new actors in the world economy with huge repercussions for global energy consumption and production.

According to the latest edition of World Energy Outlook produced by our International Energy Agency (IEA), global demand for primary energy is set to grow by 36% between 2008 and 2035. Countries which currently are not members of the OECD will account for 93% of this growth.

This transition is occurring against a backdrop of increasing energy uncertainty, generated by unexpected events of international scope, ranging from the gigantic oil spill in the Gulf of Mexico, to political tensions in the oil-producing countries of North Africa and the Middle East, and the tragic accident in Fukushima.

This latter disaster, of course, threatens to unleash an irrational and ill-conceived rejection of the future development of nuclear energy, rather than incorporating the lessons of Fukushima fully into the design, construction, operation, maintenance and safety of current and future plants.

High international oil prices, driven by growing demand but also by instability in several Middle Eastern countries, is impacting on the economic scene through higher inflation. Today everything is interconnected. The roughly 36% rise in international food prices that occurred between March 2010 and March 2011 is partly a result of this hike in oil prices.

Some people claim that high prices are the cure for high prices (because demand should fall), but this process cannot be left to markets alone. Today innovative policies are needed that seize the moment to promote a new type of growth not based on oil.

We are at a defining moment for world energy. Given the current prevailing economic and energy uncertainty, we can either put our commitments to promote clean energies and combat climate change on the back-burner; or else we can take this opportunity to broadly, deeply, and in co-ordinated fashion, transform our economies’ energy metabolism and move towards green growth. Which is the more intelligent path to take?

In the OECD we have no doubt about the answer. Climate change is destroying our planet. Our production and consumption patterns are unsustainable. We cannot procrastinate any longer, because the less we do now, the more expensive and difficult, if not impossible, it will be to act later.

Our studies show that moving towards a green economy has significant advantages. The IEA estimates that a 17% increase in the type of investments needed to put low-carbon energy systems in place between now and 2050 would produce a cumulative US$112 billion in fuel savings.

Several of our member countries are making rapid progress and have taken major steps. Korea, for example, is implementing a Green New Deal based on a five-year plan of action;

Spain has taken praiseworthy steps, but has much more to contribute

In recent years, Spain has taken major steps towards energy diversification and the use of clean energies. Our data show that 35% of its energy demand was met from renewable sources in 2010.

Spain is currently a European leader in developing liquefied natural gas. It is also a pioneer in the use and application of solar and wind power technologies. In fact, the Spanish electricity transmission grid administrator and operator, Red Eléctrica, estimates that owing to particularly favourable conditions, wind power was the country’s main source of electricity last March.

Progress is also being made in implementing an ambitious Iberian common electricity market with Portugal (the MIBEL), and in deregulating electricity and fuel prices. Efforts have also been made to create green employment, with almost half a million new jobs in sectors such as renewables, support for energy efficiency, and waste-water and solid waste treatment.

While these are laudable achievements, Spain continues to face significant structural challenges. For example, the lack of a stable framework for stimulating private investment in renewable energy, or excessive price regulation, which in many cases entails clear market distortion.

In the water sector, for example, which consumes huge amounts of energy in terms of treatment and transportation, low prices and the free allocation of concessions continue to hinder the efficient and responsible use of this supreme asset, resulting in energy being squandered.

I would like to make three specific recommendations on how to go further and promote a more efficient and green energy sector.

First and foremost, carbon emissions need to be more appropriately priced. Income obtained from environmental taxes represent a smaller proportion of GDP in Spain than in any other European OECD country.

Secondly, Spain needs to dismantle subsidies on the consumption and production of fossil fuels, which are clearly market-distorting. In emerging and developing economies, these subsidies represented over US$300 billion in 2009, and we are currently working with the G20 to quantify their cost in the advanced economies. Eliminating fossil-fuel subsidies could reduce global emissions by over 10% between now and 2050.

Lastly, along with other OECD countries, Spain needs to target the innovation effort in this sector more effectively. In the last decade, OECD countries invested US$56 billion in nuclear research, US$22 billion in fossil fuel energies, and just US$17 billion in renewable energy and energy efficiency. It is encouraging to note that Spain has started to change this panorama, by giving substantial support to renewable energies, energy efficiency, and advanced energy storage. But it also needs to continue investing more, and more effectively, and here I would again like to stress the role that green jobs could play in job creation and the country’s economic recovery.

The OECD is ready to help Spain

The OECD is ready to help Spain move towards green growth and consolidate its position as a world power in terms of renewable energy. Our IEA, our nuclear energy agency (NEA), and our Environment Directorate and all other directorates, are working with you and on your behalf to identify best practices and implement the best solutions.

We are your partners in the design of better instruments, such as the “polluter pays” concept, or the experience of the NEA (led by a Spaniard of course, Luis Echavarri) on issues of nuclear plant safety; studies such as the Environmental Performance Review of Spain, or the International Energy Outlook; or policies such as those included in our plan to support Japan in improving the safety of its nuclear plants, or our Green Growth Strategy, to be presented in a few days time at our upcoming Ministerial Council Meeting.

This strategy will provide a frame of reference for policies that can reconcile growth with the conservation of natural resources. We hope it will contribute to supporting the progress achieved at Cancún, and ensuring that the upcoming COP17 at Durban and the Río+20 process on sustainable development are successful.
It is thanks to your ambassador to the OECD and former Environment Minister, Cristina Narbona, who is here today, that these recommendations are clearly visible in the United Nations High-Level Panel on Global Sustainability, on which she served with our support.

Royal Highness, Ladies and Gentlemen:
Our economies need a change of engine. The age of carbon is over. Renewable energies are the only future viable source if we want to protect life. I am talking of a quantum leap that will require courageous leadership, effective policies and politicians, and innovative entrepreneurs. Spain must be at the forefront of this transformation, turning the environment and green growth into its new engine of development. You have the means to do so; and you will receive the OECD's full support.